Sugar mixed as bulls try to overcome lack of demand

General Comments: Futures closed mixed, with New York a little lower on Friday, but London higher yesterday. The lack of demand news has hurt the bull case and made it hard to sustain rallies given big production ideas. However, some are looking for a short covering rally in the short term. Brazil said it will increase the ethanol in its gasoline blends in May, and this could help work off a lot of the surplus production in Brazil and could tighten world balance sheets. Production has been strong in Brazil so far this year, and reports say that the new crop production looks to be strong as well, so the diversion into more domestic ethanol use will help. Exports from Brazil continue to be very strong after the delayed start to the program. The Thai crushing season is continuing, but the crushing and export pace remain slow. It is possible that the crop size there has been overestimated. Traders wonder if and when India will cut offers to the market due to the lower prices and perhaps less than expected production due to some dry weather at the beginning of the growing season.

Overnight News: Mostly dry weather expected in Brazil through this weekend. Temperatures should be near to above normal. Iraq has tendered to buy 50,000 tons of White Sugar. Wire reports indicate it bought 200,000 tons last week.

Chart Trends: Trends in New York are down with objectives of 1750 and 1700 May. Support is at 1760, 1730, and 1700 May, and resistance is at 1800, 1820, and 1850 May. Trends in London are mixed. Support is at 489.00, 486.00, and 483.00 May, and resistance is at 499.00, 502.00, and 508.00 May.

COTTON

General Comments: Futures were a little lower as traders reacted to the USDA reports. It was mostly a consolidation trade. Many are worried about a bearish surprise as prices have gotten much stronger in the last week. Bears point to increasing certified stocks levels for reasons to be bearish. Demand bulls noted positive economic data released last week and positive economic data in general as a reason to buy. However, export sales reports showed some reason for worry last week as sales were down and China cancelled some recent purchases. The current low new crop prices are bringing into question what farmers in Texas and the Delta and Southeast will plant this year. Some are wondering if planted area might be lower this year here in the US due to weak prices against competing crops. The area lost would go mostly to Corn and Soybeans. Current weather featured some precipitation in Delta and Southeast areas, but western Texas was mostly dry. Delta and Southeast areas will be dry. Ideas are that the market can continue to work higher overall.

Overnight News: The Delta and Southeast will see showers and rain Thursday and Friday, then a dry weekend. Temperatures will average near to above normal. Texas will get dry weather. Temperatures will average below normal. The USDA spot price is now 76.67 ct/lb. ICE said that certified Cotton stocks are now 0.238 million bales, from 0.221 million yesterday.

Chart Trends: Trends in Cotton are mixed. Support is at 80.55, 80.20, and 79.90 March, with resistance of 82.10, 82.30, and 83.40 March.

About the Author

Jack Scovilleis a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988. Jack writes daily commentaries - Morning Grains and Softs, in both English and Spanish and is regularly quoted around the world by news & wire services including Dow Jones, AP, Bloomberg, and Reuters. You can contact Jack by phone at (312) 264-4322 or by email at jscoville@pricegroup.com. Learn even more on our website at www.pricegroup.com.

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